As of March 2025, the sector employed 5.67 million people and accounted for over 7% of India’s GDP. This also has a huge multiplier effect due to the direct and indirect jobs that it has created and to the cars-to-homes consumption it drives in the world’s fifth-largest economy.
The use of AI has absorbed a majority of India’s engineers, yet it will require the creation of more demands and skills that current employees lack, according to industry veterans, analysts, and staffing firms.
Ray Wang, a Silicon Valley-based Constellation Research founder and chairman, said that “We are in the midst of a massive transition that will transform white-collar work as we know it."
The majority of vulnerable employees include managers who have minimal tech knowledge, those in charge of testing or identifying bugs, and ensuring user-friendliness before delivering software to clients. Other jobs that are now in danger are infrastructure management staff who provide basic tech support and ensure networks and servers are working well.
Gaurav Vasu, tech market intelligence founder, has reported that “About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don't match client demands.” Also adding that 70% of those layoffs would have an impact on workers with 4-12 years of experience.
“This (fear stemming from TCS layoffs) may hurt consumer demand for tourism, luxury shopping, and even delay long-term investments such as real estate,” Vasu added.
More so, Akshat Agarwal, a Jefferies analyst, said that "With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits - a trend which is also growing due to the rise in AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees”, reported Reuters.
The outsourcing sector has been an important element of India’s market ever since 1990, offering upward mobility to millions of engineers. Yet, as of more recent changes, the industry has weakened due to US tariff changes and inflation.
The Nasscom industry body said that “The tech industry is at an inflection point, as AI and automation move to the very core of how businesses operate."
